Wheatley: FCA will scrutinise mutuals after N&P lesson
New regulator will closely monitor the business models and product plans of building societies.
Speaking at the Building Societies Association annual conference in Manchester, Martin Wheatley, chief executive designate of the FCA, said firms will need to have done due diligence on any new product areas.
He said: “We will look at business model and want to know where do you see growth and revenue and if you have systems in place to deliver products.”
Mr Wheatley highlighted the downfall of Norwich and Peterborough Building Society, which collapsed last year amid an FSA fine over Keydata sales.
He said: “If you go into areas of business that are new, make sure your management and the board have the capacity and capability to understand the product area.
“Many people assume that simply by having products, you can relax. But you have to make sure you do due diligence on the process and ensure you are getting information back on how and where products are being sold. That will be one of our core questions.”
Mr Wheatley said he recognised that policies in the mortgage market review were controversial, particularly the proposal on restricting interest-only to where there is a clear repayment vehicle.
Asked about lenders who had already begun to leave the market as a result of this, he said: “We are in a transition phase. We can have an interest-only market but it has to be accompanied by a repayment strategy.”
He said the FCA was trying to solve a societal problem of homeowners relying too much on house prices rising and aiming to protect those who fall into negative equity when their loan is up for repayment.